Singapore Exchange Ltd

SGX:S68

Earnings Call Transcript 2020-Q1

[Lay Chew Chng, executive]

Hi, good evening to everyone here and to those on the webcast. Thank you for taking time to attend our first quarter briefing for the fiscal year 2020. I will start off with a presentation on the financial performance for the quarter; and Boon Chye, our CEO, will then present a business update.

Let me begin with some of our key financial highlights. SGX delivered a very strong set of results in the first quarter. We achieved a net profit of $114 million, a 25% increase from a year ago. It was the highest quarterly net profit in more than 10 years. Top line revenue rose 19% to $248 million. Earnings before interest tax, depreciation and amortization, or EBITDA, increased 29% to $156 million.

This past quarter saw higher demand for SGX's offering of Asian investment and risk management solutions across our currency, commodities and equity asset classes. Volumes in currency and commodity derivatives increased 55% to 13.7 million contracts, while equity derivative volumes increased 6% to 48 million contracts.

During the quarter, our cash equity investors continue to remain cautious. Traded value was $68 billion comparable to a year ago and also to the previous quarter. Total expenses increased 10% to $113 million. And earnings per share was $0.107 for this quarter, sufficient to cover the 7.5% -- $0.075 dividend that we will pay for this quarter.

I had introduced EBITDA earlier as it will be a metric that will be reflected in our income statement starting from this quarter. It complements the operating profit metric and is adopted by many of our global peer exchanges in their financial reporting. We believe that by adopting EBITDA, it will facilitate comparison to SGX's peers. EBITDA is also a measure of a company's underlying cash-generating potential as it excludes depreciation and amortization, both of which are noncash items.

This next slide shows the quarterly trend for revenue, total expenses, EBITDA and net profit for the past 5 quarters. As you can see, our EBITDA and net profit shows a positive growing trend. Compared to the previous quarter, EBITDA increased 13%, while net profit grew 10%. Top line revenue of $248 million was comparable against the previous quarter. Higher revenue from our currencies and commodities as well as cash equities offset the decline in revenues from our equity derivative business. Total expenses declined 10% to $113 million from a seasonally high fourth quarter, as we remain disciplined in our expenditure.

I will now illustrate how we have reclassified our revenues according to our new organization structure, which took place in July of this year. This first section here on this slide shows the first quarter revenues that would have been shown under our previous organization structure. If I remove all the underlying subunits, it shows our former business segments of equity and fixed income; derivatives; market data and connectivity. For comparison, here are our new business segments of fixed income, currency and commodities; equities; and data, connectivity and indices on the right-hand side of this slide.

The revenue lines under the previous ECO services have been split into fixed income and equities cash as listings and corporate actions and others. Next, our previous securities, clearing and access revenues have been grouped under equities cash as trading and clearing; collateral management, membership and others have been renamed as treasury and other. Our post trade -- our previous post-trade services revenue items have been grouped under equities cash as security settlement and depository management.

Under our previous derivative business, equity and commodities revenue have now been divided up into the FICC as well as equity derivatives units as trading and clearing. Collateral management, license membership and other revenue have also been divided into these 2 units of currencies and commodities and equity derivatives, and we call it treasury and other revenue. Finally, under our previous market data and connectivity business, the market data revenue line has been renamed as market data and indices.

So the -- for those who are here today, there is a slide that you can have access to in the sort of deck that you collected that will show this in greater detail. For ease of comparison against our past financials, we have restated our quarterly and annual income statement for FY 2019 under the new organization structure. You may download them from our Investor Relations website.

So following on this is a waterfall chart that shows our quarterly revenue movement year-on-year. Boon Chye will review each of the 3 main businesses in more detail later. As mentioned earlier, our top line revenue grew 19% to $248 million.

Our FICC business earned revenue of $46 million, up 57% year-on-year. It accounted for 19% of our total revenue compared to 14% a year ago. Fixed income revenue grew 16% to $3.2 million. There were 270 bond listings, raising $125 billion during the quarter.

Currencies and commodities revenue increased 62% to $43 million. Revenue from trading and clearing rose 57% to $28 million, and we saw record trading activity in both currency and commodity asset classes. Treasury and other revenue increased 71% to $14 million, mainly from higher treasury income.

We earned higher returns from the management of margin balances following increases in U.S. dollar interest rates as well as an increase in margin balances that are placed with us. These margin balances grew due to increases in margin requirements as well as open interest.

Our equities business recorded revenue of $176 million, up 14%. This business comprises of cash equities as well as equity derivatives and accounts for 71% of our total revenue. Cash equities revenue rose 8% to $90 million and accounted for 36% of total revenue. And within cash equities, we have listing revenue, which was $9 million, similar to a year ago. We had 2 international listings that raised $844 million during the quarter compared to 6 listings last year, raising $168 million.

Trading and clearing revenue was comparable at $45 million. Total traded value on our cash equities market was comparable at $68 billion. Average clearing fee declined to 2.60 basis points. Security settlement and depository management revenue increased 25% to $25 million, and the increase was mainly due to a change in the mix of settlement activities.

Equity derivatives revenue was up 21% to $86 million and accounted for 35% of total revenue. Within equity derivatives, you have trading and clearing revenue, which increased by 9%, as equity derivative volumes rose 6% to 48 million contracts. This was mainly due to increases in volumes in our Nifty 50, our Nikkei 225 and the MSCI Singapore Index futures contracts.

Treasury, license and other revenue grew 44% to $35 million from higher treasury income. I had explained earlier the reasons for the increase in treasury income. Our average blended fee per contract for equity, currency and commodity derivatives was higher this year at $1.15 compared to $1.05 a year ago. This was mainly due to a change in the mix of products traded and an increase in higher fee-paying customers.

Lastly, our data, connectivity and indices business recorded revenues of $26 million, an increase of 4%. This business accounted for 10% of our total revenue, is a steady business, and the increase was mainly due to higher derivatives connectivity subscriptions and continued growth of our co-location services business.

The next slide is on expenses. Total expenses rose 10% to $113 million and essentially is due to 2 things: higher variable staff costs as a result of higher profitability and an increase in variable royalties expenses from higher volumes in commodity and equity derivatives.

Staff costs grew 15% to $49 million. Provision for variable staff costs increased by 42% to $16 million, mainly due to higher profitability, as I mentioned earlier. Fixed staff costs rose 5% to $33 million due to an increase in headcount and annual staff salary increments. Average headcount increased by 18 to 833.

Technology expenses declined by $3 million, as you can see in the slide, to $16 million. However, this was mainly due to the adoption of our new accounting standard on leases that took effect on 1st of July of this year, our new accounting year. Rental expenses of $2 million from our data centers that were previously recorded as technology expenses are now recorded as depreciation expenses. So that's a requirement from the new accounting standard.

Additionally, we were also able to reduce the cost of some vendor-managed services. Processing and royalties increased 27% to $13 million, mainly due to the higher commodity and equity derivative volumes. Premises expenses also declined by $3 million. And again, this is due to the adoption of the new accounting standard, which requires rental expenses from operating leases to be reclassified as depreciation.

So you can see on this slide as well that depreciation and amortization increased by 42% or $6 million to $22 million. And again, it's from the adoption of the new accounting standard. I will elaborate on this in the next slide.

So this slide shows the depreciation and amortization over the last 5 years. Of the $6 million increase in the -- in this expense category, $5 million was due to the adoption of the new accounting standard, as I explained earlier. And leaving that aside, the increase of $1 million of year-on-year in depreciation and amortization was mainly due to new systems that were implemented last year, such as our securities post-trade system.

This is my final slide. It shows the trend of our key financial performance indicators for the past 5 quarters. Our financial indicators are robust based on the good set of results that we produced for the quarter. Operating profit margin was 54%. EBITDA margin was 63%. These were the highest in the last 5 quarters. ROE is the highest ever achieved in a while at 40%. The Board of Directors have declared a quarterly dividend of $0.075 per share, unchanged from a year ago. Thank you.

[Boon Chye Loh, executive]

Good evening, everyone. Thank you for joining our first quarter FY '20 results briefing. Since we embarked on our strategic priorities of building a multi-asset exchange, growing our international presence and deepening partnerships and networks in -- from FY 2018, we have made progress.

I'm glad to report that about 1/4 of our clients increased the number of asset classes that they trade with SGX. This include clients who initially traded only equity derivatives and later expanded into our currency and commodities futures. Customers also recognize our strength in offering them round-the-clock liquidity in Asian-centric asset classes, capital efficiencies through margin offsets and the convenience of one-stop access to our entire suite of products.

Over the same period, we saw overnight trading, so-called in the T+1 session, grow from 10% of total derivatives volumes to 18% in the first quarter of FY '20. This is a testament of success in growing our international presence to onboard customers from the western time zone. We've also entered into several collaborations and taken strategic investments in various partners across asset classes.

And at the start of this fiscal year, FY 2020, we announced a new organization structure that capitalizes on our strengths as an international multi-asset exchange to pursue growth opportunities and build scale in multiple asset classes. We explained the changes in our last briefing -- the results in July. This is the first quarter in which we report in this new structure.

As you heard from Chng Lay Chew, our CFO. We have had a strong first quarter in FY '20. We saw revenue growth in all of the business segments in which we now report following our reorganization. First, in fixed income, commodities and currency, FICC, that contributed to 18% of total revenue, with year-on-year growth of 57%. Equities, comprising our cash equities and derivatives equity businesses, contributed 71%. Data, connectivity and indices contributed 10%.

And I've said and noted at our Annual General Meeting on the 3rd of October, while working to grow our FICC and DCI businesses at the fastest pace -- at a faster pace in the next few years. As the overall pie grows, equities' contribution to total revenue may adjust accordingly.

In the quarter, while we received quite a number of awards, 6, we were once again recognized for innovation and commitment to help clients in investment and portfolio risk management. The 6 awards were: Best FX Exchange in Asia, Best FX Clearing House in Asia, those were by FX Week; Derivatives Exchange of the Year by Asia Risk Magazine; Exchange of the Year by FOW; Exchange of the Year in Derivatives by Global Investor; and Asia Pacific Derivatives Exchange of the Year by GlobalCapital.

Let me now move on to the respective business lines. In fixed income listings, the number of new bond listings and the amount raised picked up in the first quarter. A total of 270 new bonds were listed in first quarter compared to 247 in the same quarter last year. Total amount raised was SGD 125 billion, an increase of 36% year-over-year.

As interest rates are expected to remain low for longer, our debt capital market's listing platforms provide [ innovation ] venue for companies to raise capital. We continue to see and increase the number of listing agents, one of our key intermediaries to grow our footprint internationally. And in the last 2 years, we've added over 300 new issuers, including those coming from the Americas.

Another area that we're focusing on is sustainable financing, and our DCM platform has been attracting issuers in this space. We're one of the top 5 listing venues for international green bonds. In September, we welcomed our first U.S. dollar sustainability bonds from the Philippines, adding to the more than 100 green, social and sustainability bonds that are already listed here. And there is a dedicated page on the SGX website. There, you can see the full list of such bonds.

And indeed, it's been a record quarter for our currency futures as volume increased 40% year-over-year to 7 million contracts or USD 383 billion. Our CNH and INR futures volumes increased by 50% and 32% year-over-year, respectively. What is important to note is that the currency market is a global one, and we're excited to see the growing value that our currency futures bring to market participants internationally and with round-the-clock liquidity.

Overnight, T+1 volume contributes to 29% of total currency volumes. This reflects a broadening of participation from market participants in the non-Asian time zone and reinforces our strategic priority of deepening our international presence. International market participants also enjoy access across countries and across asset classes. For example, we offer investment and risk management solutions for China through our CNH currency futures and the SGX FTSE China A50 equity index futures, with margin offsets on spread positions.

In addition to growing participation in the non-Asian time zone, we're also excited about the collaboration between SGX and BidFX to offer our suite of listed Asian FX futures alongside the OTC products on the BidFX platform. This will bring together both pools of liquidity, those on the exchange-traded and on electronic OTC platform. Technical integration is completed, and we are now focusing on going to market in this second quarter of FY '20.

Moving over to commodities. INR volume increased 98% year-over-year to close to 6 million contracts as prices traded between an all-time high of USD $126 per metric ton in July and it hit a low of USD 81 per metric ton thereafter. We are also seeing sustained participation from financial market participants as iron ore evolves into a fundamental portfolio factor for institutional investors. This adds to liquidity, as is reflected in our screen volumes, which is up 80% year-over-year. Freight and rubber futures volumes are comparable year-over-year, with SGX remaining the largest clearer of dry bulk derivatives globally.

Moving on to equities, and starting off with equity derivatives. Trading volumes in our key equity index contracts were up 6% year-over-year, with growth in Nifty 50, Nikkei 225 and MSCI Singapore Futures contract, and open interest was up 18% year-over-year. Similar to what we've seen in the FX market, overnight T+1 volume has also increased. We will continue to leverage on our international presence as a provider of efficient Singaporean access to Asia. And our suite of equity futures contracts now covers 99% of Asia by GDP. And with Asia continuing to lead global growth, we are confident that we will be able to provide our clients with relevant investment and risk management solutions.

We have traction in connecting OTC equity stocks market with exchange trading and clearing with the net total return products. And the next stage is to grow -- screen liquidity in these contracts as well as to innovate and expand the product shelf in these markets.

Revenue in the cash equity listing was $9 million comparable year-over-year, with issuers continuing to tap our SGX capital markets to raise funds. Total funds, including secondary funds raised, grew by more than 3x, 3x year-over-year to SGD 4.3 billion. And we welcome the listing of Prime US REITs earlier in the quarter. That is our third pure-play U.S. REIT listing this year, bringing a total number of U.S.-focused REITs to 5, which demonstrate the rising investor interest in the U.S. real estate market.

And overall, the REIT sector has performed well, having generated over 24% of total returns in the 9 months from January to the September period. And SGX-listed REITs are also well represented in the international real estate indices. This is indeed a sector that we can expect to garner interest as investors search for incremental yield in today's low interest rate environment.

Earlier this month, in October, we welcomed the listing of Lendlease Global Commercial REIT to bring the total number of SGX-listed REITs and property trust to 45, and we can continue to look forward to a growing family of REITs.

Moving on to the cash equities trading and clearing. Total traded value stood at close to SGD 68 billion comparable year-over-year, amid a mixed performance in regional markets. We have embarked on initiatives to cater to the evolving needs and investing behavior of investors.

In July, we announced a strategic investment in Smartkarma, a Singapore-based fintech that offers a global investment research platform. This investment comes on the back of a growing trend towards self-directed and independent research. We have now included Smartkarma's copper solutions in SGX's range of post-listing services to help our listed companies connect more effectively with existing and potential investors.

We have also worked with partners to provide investors with often big ways of accessing the market. Just last month, in September, DBS digiPortfolio and StashAway Singapore Income Portfolio commenced robo-advisor services on SGX-listed exchange-traded fund, which provides retail investors with accessible and low-cost solutions to invest in the Singapore market.

And we continue to innovate and broaden our product shelf. In the quarter, we launched the third batch of single-stock DLC, daily leverage certificates, with 5x leverage on 3 Singapore and 3 Hong Kong large-cap companies. That brings the total number of DLCs to 75. And we can expect to add more in terms of new geographies to the product shelf in this financial year.

In the DCI, data, connectivity and indices businesses, revenue grew 4% year-over-year. The revenue for market data indices were comparable year-over-year, whilst the connectivity revenue was up 6% from higher derivatives connectivity subscriptions and continued growth of our co-location services business.

And earlier this morning, we announced that we have licensed our iEdge-FactSet Global Internet Index to Nikko Asset Management as investors increasingly turn to thematic investing. Thematic investing is growing rapidly, and our very own SGX Index Edge, in collaboration with partner FactSet, have developed a suite of indices aimed at catching global and transformational trends.

So looking ahead, what we see in the markets today further reinforce our approach to cement our multi-asset exchange strategy, offering efficient Singaporean access to Asia. With global growth concerns once more at the top of investors' and certainly policymakers' mind, we expect low interest rates to persist. In such an environment, it is generally harder to find returns. Investors will struggle to find returns but, instead, with the lower rates for longer, investors can seek growth across multiple asset classes. And emerging Asia is growing at double the growth rates. And notwithstanding the ongoing trade tensions, it is expected to continue to lead global growth in the medium to long term.

Markets in many asset classes are also evolving, which provide opportunities to make a difference. One, passive investing will continue to grow and with it, the demand for equity index products on exchanges. The impact of global regulatory changes has led to greater centralized clearing of OTC derivatives. And market participants will continue to seek greater capital efficiency.

The fixed income market is also electronifying. SGX will continue to build on our product and services to offer international market participants, investment and risk management solutions across multiple asset classes as well as provide corporates with various capital-raising avenues and access to global and Asian capital.

As previously guided, we aim to keep our operating expenses between SGD 465 million to SGD 475 million, and technology-related CapEx to be between SGD 45 million to SGD 50 million.

With that, I conclude my presentation, and I'll invite my colleagues to join me for the Q&A session. Thank you for your attention.

[Lay Chew Chng, executive]

Do we have a first question?

Yes, Nick.

[Nicholas Lord, analyst]

Sorry, it's just a question of detail. And apologies if you put it in here, and I haven't found it yet. But can you just tell us what happened to your derivative fee per contract as it would have been under the old disclosure, just for comparability purposes? And maybe just talk through some of the drivers of what has happened there?

[Boon Chye Loh, executive]

Using the whole basis.

[Lay Chew Chng, executive]

Basically, we have disclosed the numbers in our performance summary. I think it was $1.15, right? 1 1 5, right? And that's the same way that we have calculated it as in the past. So if you compare that, it was $1.05 a year ago. So we have not changed the basis of calculating the blended fee.

[Nicholas Lord, analyst]

And sorry, how does that compare to Q4?

[Lay Chew Chng, executive]

I don't have the numbers. But if I recall, the Q4 numbers are roughly the same because if you look at what we have done, we have been able to achieve higher fees from some of our participants as well as being able to gather more full fee-paying customers. So that's why you have seen across most of the -- across our asset classes, an increase in fees, which has resulted in an increase in the total blended average fee.

[Nicholas Lord, analyst]

Okay. And I guess, just one last point, if I remember rightly from Q4, you had obviously got quite a decent fee on the A50 contract because the volumes are quite good. So you haven't had to pay or give trader rebates. So my question is, what happens to that in the quarter. And then presumably, I mean, the iron ore contract volumes clearly have been very good in this quarter. That's a high sort of fee contract. So would I be fair in making the assumption that, in terms of movement versus sort of previous quarter, maybe you've made a little bit less profit on the A50 because you've had to hand some of that back, but obviously that's been offset by the fact that you've done so much more on the iron ore or is that too simplistic a way of looking at it?

[Boon Chye Loh, executive]

So if you look at market activity for last quarter versus previous quarter, actually, in equities, it was roughly the same. Overall, ADV was roughly the same. I think that the key difference was probably the iron ore performance. So I think on -- you would expect, in aggregate, that fee per contract in the overall portfolio had some upward pressure.

[Unknown Analyst]

Next question from HSBC Hong Kong.

Two questions actually. The first one is what is driving iron ore volumes and do you see it as sustainable? The second question is what's your outlook on dividend? Will you maintain the same dividend in this current FY?

[Boon Chye Loh, executive]

On the iron ore commodities, as I mentioned, [ at least such as ] commodities, but also in currencies, a quarter of our equity that [ clients ] today trade more than equities. So this is not a quarterly effort or overnight effort. Since we started and embark on this multi-asset strategy 2 years ago, we're now seeing the results coming through in terms of participants trading more than one product. And obviously with our international presence, growing the overnight liquidity, the so-called T+1. And then obviously the market was also volatile with the highs of $121 per metric ton and the low was $81 that was registered in the quarter. But I think it's important to recognize the growth in the overnight session through international participants and also participants trading more than one product today. And clearly, the margin offsets, whether that's equity versus currency that also brings a bit of a stickiness from the participants.

On the second question on dividend, we revised our dividend policy about a year ago, in the last quarter of FY '18, from paying out a high of 80% of net profits of $0.20 to an absolute of $0.075 per quarter. Our aim is to pay a sustainable and growing dividend, but also recognizing that SGX is also on a growth path. And I hope our strategy of being a multi-asset exchange is now beginning to bear fruits to show the trends that we're headed for.

Any other question from anyone? Yes.

[Rikin Shah, analyst]

Rikin from Credit Suisse. Congratulations on good set of results. You did mention that FICC and data -- DCI business would be the key growth businesses going forward. On the FICC side, the potential strategy and the potential way of monetizing from electronification of the fixed income as well as clearing of OTC derivative remains clear. However, on the DCI business, if you could elaborate how would you be monetizing this more, that could be helpful.

[Lay Chew Chng, executive]

Yes. So first, I'll say the FICC, on a relative basis, obviously from a different base, will grow faster than the rest of our businesses, including equities, but equities coming off from a very large and solid and strong base. In the DCI business, it's taken us, I guess, in the last 3 years essentially, even though it started slightly before that, in the last 3 years, where we now build 2 things. One is being recognized by the sell-side in many ways in terms of being able to be the provider of index calculation services. And I think this is an important one because you are really interacting with one of the key parts of the market participants on the sell-side. And then the other one is obviously building out capability on thematic indices. So we can license that, and we can work with asset managers to launch ETFs. So I think it set us up for a good base to try and grow, one, either organically; or two, if there are partnerships that we can work with other providers; or third, if they're value-adding bolt-on, which I've said before, in asset classes we want to grow, we'll look at it.

[Jeffrey Tan;The Edge]

Jeffrey from The Edge. I'd like to understand why SGX established the $1.5 billion multicurrency debt issuance program. I mean it's not like SGX is short of funds, so why raise that from the market?

[Boon Chye Loh, executive]

Well, as you pointed out, we generate good cash flow from our businesses. We are unlevered at this point in time. We'd like to more actively manage our balance sheet. And as we now have built on a good base of really being recognized as the exchange for Asia-centric asset classes, coupled with the trend that we see, while not unique, lower rates for longer, passive investing, we actually see good growth opportunities. We can have that growth organically. We can have that grown through our cash. But I think the [ ENTM ] program gives us added flexibility to fund any growth we want. There are no securities being issued right now. But obviously, if we do -- and if and when we tap that, we'll make the necessary announcement to the market.

[Unknown Attendee]

My question is from -- 2 questions from Angela Tan from SPH. First, have you identified any new investment opportunities? And the second one is what is the status of your arbitration proceedings with the NSE.

[Boon Chye Loh, executive]

We, in looking at our businesses, always, obviously, evaluate opportunities or make some smaller bolt-on in the last 2, 3 years. Baltic Exchange is one of those. We've made some strategic investments into Trumid, into BidFX. So we're constantly looking at opportunities that could add to what we have today and to further really position that anything around Asia in terms of asset classes, access, investment, risk management, there's only one exchange to go, and that's SGX.

On the second question, on the [ indemnity fee ] situation, the -- nothing further to add other than what I said before. The regulators have given both NSE and SGX regulatory dispensation. We will need some other additional local regulatory approvals. Both NSE and SGX are working on that, and we do see a path forward.

[Unknown Attendee]

A question from Morningstar. What are the products that drove the growth in your T+1 overnight session?

[Boon Chye Loh, executive]

So the -- these are the ones that you would actually expect, which is the China and the Japan complex. These are the 2 Asian complexes, if you like, which are most influenced by overnight news flow and are most likely to have 24-hour macro applications. So in the Japan suite, primarily the Nikkei futures. In the China suite, both the currency futures as well as the A50 futures.

[Lay Chew Chng, executive]

Any other question? If not, we can have coffee outside. Yes, sorry.

[Unknown Analyst]

[indiscernible] Can you talk about how do you differentiate your thematic index product? Because I think there's a lot of index providing a lot, right? So how does -- how do you differentiate that versus the competitor?

[Boon Chye Loh, executive]

Okay. I think you're going to start off -- I mean, capability is one thing, but then you got to start out with what does your platform offer, right? So obviously, I mentioned before, different asset classes, anything centered around Asia. Why is that important? Because when you create a thematic index, obviously, you need the asset manager accessing what kind of demand they can generate for investments participating in ETFs. But then you want the ETFs to be liquid. Obviously, you can get market makers, but you then also want to underline, and we have those underlying in terms of access in Asia, right? Whether that's into the equity market, whether that's in the currency, and that always helps.

[Lay Chew Chng, executive]

So maybe I can add to that. Generally speaking, we, I think, have achieved a level of maturity in having a platform that's able to do this in a responsible, reliable and scalable way. So that's really the table stakes for entering this business. The second part is that you know there are many, many indices in the world. I think it's 3 million. And therefore, there's no shortage of ideas. And there's no real room for someone who's there to throw more spaghetti on the wall with ideas where there is no consultation with clients. So I think the difference that we have is that we are focusing on areas where we feel we add value, and that would be particularly where the underlines are based in Asia, Asian stocks, possibly Asian themes or sectors. But secondly, I think we go out of our way to work very closely with the client to say, what theme are you looking for, what niche are you trying to fulfill, what demand do you see.

So we have some intellectual property around interesting themes, we think, around the Asian capital structure. We have some intellectual property around investment factors, which are relevant to the Asian capital structure. But I think our path forward is very much not just about throwing spaghetti on the wall, but making sure we identify something which helps us deliver the Asian capital structure in a directed way to demand. And we think that that's a niche that's not addressed by the people who've got the millions and millions of indices. So I think we're growing as we learn, but we're pretty excited by some of the ideas. I think the index you saw today with Nikko AM, that's pretty interesting as a combination. We've done some very interesting things around REITs as well.

[Unknown Attendee]

Okay. There's a question from CIMB. Can you give more color on the IPO pipeline? And second question is concerning the trend of passive investing. Are there any gaps that SGX sees which the group can pluck by product development?

[Boon Chye Loh, executive]

On the IPO pipeline, I think we are very pleased that Singapore continues to be a very robust market in the -- amongst exchanges that have had more than $1 billion fundraising. Globally, we are the only exchange this year that has got actual fundraising 40% larger calendar year-to-date than the previous year, and that's a $3 billion number. We also have very strong secondary fundraising and the strength of it comes really largely in our REIT sector where there have been several international transactions, and there continue to be more that we expect to see on the horizon. Not only within the REITs itself, we do see other sectors, like consumer health care technology, also starting to come true for the catalyst market. So we are optimistic going into the new year. But fundraising is very strong in Singapore, and both primary and secondary, and we expect a better year ahead.

[Lay Chew Chng, executive]

I have Kin Yee, our Head of Data, Connectivity -- Indices business, talk about the second question.

[Kin Ng, executive]

So in the passive investment front, with our Index business, we are definitely well positioned to address some of the needs, especially in Asia, where we are seeing a lot of customers who are underserved. So whether it's calculating for the sell-side banks or for serving the ETF issuers, which we see a growing interest in Asia, we would be well positioned to exploit those opportunities. On top of that, I think on the index themes, we have started with thematic indices, and we believe there are more innovative indices that we can develop, either with partners or internally. So some areas include factor indices, for example. Thank you.

[Lay Chew Chng, executive]

Okay. Any other question? Yes.

[Unknown Analyst]

Just one last one. On your cash equity side, right, because I see the volume has stabilized, are you confident that, like, maybe you have already arrested the structural decline in your cash equity volume, that this is like -- that, that business would not decline anymore, and they will be stabilized going forward?

[Boon Chye Loh, executive]

Well, I think it's important to focus on the initiatives. So when we put the new organization together, we basically have put cash and reduced equities to the one platform. Why do we do that? One, there is no real benefit to artificially divide a participant into a cash or the risk market. They reinforce each other. Two, we have been connected institutionally to clients globally through our reduce platform and if we are able to bring more institutional clients to the cash equity markets while our global network in derivatives, that will be a plus. Three, our derivatives participants are used to working with us in launching new products. So we could launch new SSFs, single stock futures, on certain markets, including the Singapore market. And that will congregate further trading, further liquidity on many of index stocks across the regional markets. So there's no real benefit from a artificial, I'll call it, divide between a cash and derivatives, and we've done that by trying to put the 2 on to one business unit.

[Unknown Attendee]

Okay. One question just came in me from Angela Tan again. Are there any interests in your dual-class structure? And any reason there has been no listing so far?

[Lay Chew Chng, executive]

Well, I think for any IPO, market structure, capital structure are just tools to facilitate capital raising. Capital raising, at the end of the day, requires a combination of factors, right? Clearly, investors' interest, certain thematic timing of the market and obviously also outlook for certain industries. Since we have done that, we're clearly talking to companies and companies -- some companies have shown interest. But capital raising decisions do require and take some time.

All right. If there are no questions. Thank you very much. Appreciate your participation and presence this evening. Thank you very much.